Monday, September 21, 2009

What solar will cost in Germany

In recent months, there has been a lot of talk in the English-speaking world about what PV will cost Spain and how we need to be careful not to ramp it up too fast. There is no doubt that photovoltaics is currently the most expensive source of renewable energy, but the question is whether the figures being tossed about are accurate.

In Germany, a skeptical economics institute (RWI) recently calculated that Germany would be forking over 77 billion euros for photovoltaics over the next 25 years. But a few weeks ago, Claudia Kemfert, probably Germany's leading economists specializing in renewables, pointed out a number of mistakes that had been made in the study -- and corrected that figure down to 50 billion euros. She also pointed out that the annual figure was around two billion euros, less than Germany will be spending per annum subsidizing domestic coal production up to 2018.

Two main things were overlooked in the RWI study. First, because photovoltaic electricity offsets conventional electricity, the study subtracted 5.2 cents per kilowatt-hour (the estimated cost of conventional power) from the cost of photovoltaics. The problem with this is that solar does not offset just the cheapest baseload power, but also power purchased on the spot market at peak times; after all, solar power is primarily produced around lunchtime, when power consumption first peaks each day. The correct figure, she argues, would therefore be seven cents.

Second, because so much solar power in Germany is distributed across small systems on rooftops, the grid is used very little -- indeed, distributed PV actually apparently has a stabilizing effect on the grid. As Kemfert points out, Germany grid operators estimate the savings this year already at 45 million euros. The skeptical study reportedly does not take that effect into account at all.

The RWI study is therefore roughly 50 percent off the mark according to her calculation, i.e. solar is not that expensive.